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Unilever Multiples Valuation

 This is going to be my last multiples valuation for now. The reason being is that I fell like my level of analysis when using multiples as a means of valuation isn't satisfactory. However, I will still do my best in giving a sufficient analysis of the Unilever stock. 


Let's start by looking at one of the most important ratios, the P/E ratio. As we can garner from the table Unilever's P/E ratio is moderately smaller in comparison to it's competitors. As it has a P/E ratio of 23.5x in comparison to it's competitors' average of 29.6x and its' median of 26.4x. However, this seems to be the case mostly because of how much Nestle stands out as an outlier, with a P/E ratio of 42.4x, whereas the rest of the firms used had values ranging from the mid to late 20.0x range. I chose Nestle as a comparable company to Unilever because they both compete in the food and beverages industry to a certain extent with brands like Knorr (Unilever) Vs Maggi (Nestle) and Breyers (Unilever) Vs Dreyer's (Nestle). Thus, it would be a biased decision to remove Nestle from the analysis. So, it would seem that investors have low expectations for the future growth of Unilever in comparison to it's competitors. This can be seen as a good thing in that the Unilever stock could be a good, underrated buy for sharp investors; however, this could also not be true. Potentially, this gives Unilever the opportunity to buy back some of it's shares because it feels that the market has gone too far in undervaluing it's shares. This in turn could improve it's financial ratios such as it's P/E ratio, as by buying back more shares the number of outstanding shares falls, resulting in an increase in EPS. This will make Unilever less expensive per dollar of earnings. 


Now looking at the EV/EBITDA ratio, Unilever has a value of 13.7x, which is decently lower than the mean/median value of 17.9x. This could mean that in comparison to it's competitors Unilever is over-leveraged or it has low amount of cash holdings. As a result, to investors, Unilever stock  isn't a desirable buy as it's ratio is decently smaller than the competition, this could be a result of it having a more leveraged balance-sheet, thus being a riskier buy overall. 


That is all I can analysis at my current ability, I hope to soak in more knowledge and greatly improve my knowledge of finance. From this point forward, I aim to be more of a story teller in my posts and much less like a bland textbook. 

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